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Questions tagged [commodities]

The tag has no usage guidance.

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Commodity Selection Index Derivation

The formula for the CSI, as found on page 111 of J. Welles Wilder's New Concepts in Technical Trading Systems (link), is as follows: I'm curious about the derivation. Multiplying the ADXR and ATR14 ...
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3answers
178 views

Commodity Asian Swaps

I'm trying to find info about asian swaps on oil/energy products and about their pricing methods. However, all I could find are on asian options. Would be glad if you can provide me with some ...
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1answer
112 views

how to derive the cost of carry formula

Can anyone explain why the cost of carry formula looks like this: $$F_0 = S_0 \cdot e^{(c-y)T}$$ ,where $S_0$ equals the spot price when $T=0$, i.e. today. $c$ denotes the cost of carry and $y$ the ...
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38 views

Resource to learn about Long / Short Commodities portfolio

As title says, I'm looking to learn more about Commodities trading and how to report and monitor a Long short Portfolio. Can anyone point me to a good book / website where I can improve my knowledge? ...
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1answer
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Is there any open source library for commodities trading (pricing/risk managment)?

I think the question is no, as commodities trading requires far more exotic payoffs and hence higher variety of code. I know that there is a private company known Allegro, one of the main suppliers ...
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1answer
54 views

Some questions of precious metal Futures

We always regard precious metal as a FX rate e.g XAU/USD. Is there any concept of spot rate for precious metal? If yes, then we know the dynamic of FX spot rate under risk neutral measure can be ...
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1answer
174 views

Natural Gas Modelling

In job adverts for natural gas/power trading it states knowledge of supply and demands models for these commodities. Does anyone know of any good papers or primers on S&D modelling?
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1answer
88 views

How does an exchange guarantee both legs of a calendar spread are executed atomically to give a specific spread?

In commodities/oil you have monthly contracts for a given Future, e.g. on CME the Crude Oil Futures (CL) monthly contracts can be trades, and have Globex codes such as CLZ8(Crude Oil Dec18 Future), ...
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1answer
48 views

Futures options data [duplicate]

I've been looking into futures options data for my thesis. What are some sources to get futures options data for an affordable price?
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2answers
133 views

How to calculate correlation between commodities with forward prices?

I'm trying to understand which is the correct way to calculate the correlation between 2 commodities with forward prices. My idea would be first bootstrap forward prices to have only spot prices for ...
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2answers
94 views

Distribution of data for GBM

I am running some Monte Carlo simulations with GBM on time series of commodity prices. First of all, the price data is annual between 1900-1950. I would firstly like to know if it is bad practice to ...
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2answers
63 views

Pricing options with 0 or negative underlying values

I am trying to calculate the value of an option whose underlying is the calendar spread between two months for a commodity (front month Brent vs 2nd month), usually known as a calendar spread option. ...
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57 views

Black 76, finding current forward price and interest rate for a commodity option

Lets say the commodity in question is gas, flowing everyday for a period of time, and my curve data format is "DataEntryDate, FlowingFrom, FlowingTo". To get the forward price should I find the most ...
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1answer
171 views

Interpretation of PCA for commodity futures

I've done some PCA analysis of a portfolio consisting of futures on certain commodities. However, I am unsure of how to interpret the output as most of the information found online deals with fixed ...
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1answer
94 views

Calculating Flat Price Risk for Physical Commodity Trades

I've been reading Craig Pirrongs Economics of Trading Firms published by Trafigura: https://www.trafigura.com/media/1364/economics-commodity-trading-firms.pdf Very informative read. The point I have ...
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0answers
37 views

How are Risk indices linked to Physical Trading returns?

Ref to my previous question here: Physical trading spot transaction analysis-Quantified I have been able to narrow down my aim to defining a physical trading strategy P&L. My question is, how ...
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66 views

Physical trading spot transaction analysis-Quantified

ref to my previous question here: Physical commodity trading quantitative risk return model I am currently new to commodities and physical trading. I have currently narrowed down my area of analysis ...
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2answers
222 views

Physical commodity trading quantitative risk return model

I am very new to commodities, I was previously in portfolio management/optimization (Black Litterman Markowitz etc). I am now a Buy-Sell analyst for Petrochemicals, and need to understand the basic ...
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1answer
100 views

How to create a currency independent commodity index

I'm looking for insights on a methodology to create my own bespoke index, specifically a gold index. I'd like to take the price of gold in various currencies, along with the different cross rates ...
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How is this steel price implied based on enterprise value-to-Ebitda?

How was the steel price of $650 per ton calculated based on the forward-looking enterprise value-to-Ebitda in this Bloomberg news article? https://www.bloomberg.com/news/articles/2018-03-23/tariff-...
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76 views

Structured Energy Option Pricing

Let's say I have an option with the following terms. This is for an energy product (ie natural gas) The contract will last for 6 months The payoff is the difference between the first of month index ...
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0answers
150 views

What is a stochastic processes which reasonably captures commodity price dynamics?

I ran into a stumbling block earlier when I tried to price stochastic annuities (see Asian options). This is actually technically an acturial problem, but is well adapted to the techniques of quant ...
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328 views

bloomberg api: how to handle the max 1000 requests limit

I am using the Bloomberg API in R (package Rblpapi) to find the nearby price at elevator locations for Soybean/Corn in given states in the US. I use the function lookupSecurity: ...
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1answer
100 views

How do energy companies measure the magnitude of the risks of buying energy at a variable price and selling it at a fixed price?

Power and gas retailers are exposed to a variety of risks when selling to domestic customers. Many of these risks arise from the fact that customers are offered a fixed price, while the retailer must ...
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104 views

What is a good algorithm to predict volatility in metals commodity markets? [closed]

I'm trying to create a script to predict major swings in the price of Aluminium. I am trying to implement a dynamic time warping algorithm for the same. Was wondering if this really is the best ...
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1answer
74 views

Making an IB contract: Directory for IBpY exchanges and commodity codes?

All the tutorials for making a contract seem to use either Apple or Google as examples: goog_contract = create_contract('GOOG', 'STK', 'SMART', 'SMART', 'USD') If I want to trade CME Feeder Cattle ...
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1answer
102 views

Dual Settlement Market Backtesting and Analysis

An interesting problems I have been dealing with as a relatively new quant to the Electricity markets is the difficulty of back testing. The issues I have been having with backtesting are that the ...
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1answer
574 views

Why does a futures price converge to a spot price?

I've sort of get the arbitrage logic of it, i.e if the futures price is more expensive than spot price, then investors would short the contract and buy the asset for delivery. Correct me if i'm wrong. ...
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1answer
96 views

Investigating a question: “Does commodity price volatility scale with price level?”

I'm trying to answer a simply posed question using a GARCH model: can we expect larger price shocks in a commodity when it's price is higher? (i.e., may we expect larger price shocks at \$100 per ...
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2answers
185 views

Do underlying assets have a no-arbitrage price?

Can it be shown that the Fundamental Theorem on Asset Pricing (FTAP) applies to underlying assets -- namely bonds, equities, and commodities? FTAP says that assets have no-arbitrage prices equal to ...
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1answer
108 views

How to check if relationship between two variable changes over time?

I am working on a commodity-exchange rate model as part of my thesis. My dependent variable is log of first difference of exchange rate of Colombia and my independent variable is log of first ...
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0answers
86 views

Option valuation in illiquid markets

In my problem I have a liquid underlying, whose derivatives are not quoted and therefore the option market is illiquid. For this reason I can't get the implied volatilities and calibrate my model in ...
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0answers
460 views

Commodity index member weights (historical) for S&P GSCI and BCOM

Does anyone know a datasource for retrieving the historical index member weights for the two major commodity indices S&P GSCI and Bloomberg Commodity Index? My institution provides access to ...
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101 views

commodity futures options data

I am trying to get my hands on some historical commodity futures options data for about 35 commodity futures. So far in my search the only way I can get the data seems to be through the Commodity ...
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2answers
85 views

How to derive the prices of downstream products from raw commodity prices?

I am looking for a simple way to estimate price time series of downstream products based on price of the main "raw" commodity. For example, would like to estimate a price for wheat flour based on ...
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1answer
158 views

How do you define returns when price may be negative (electricity price)?

I'm trying to model GARCH volatility on electricity prices. Typically the first step is to use prices to obtain log returns to make them stationary. I have encountered a small problem however: ...
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2answers
2k views

Trading physical gold vs XAU

What is the difference between trading physical gold forwards and XAU/USD forwards? Why are both traded? The physical gold forward would obviously be settled physically, but how is an XAU/USD settled, ...
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1answer
147 views

Black's model and Monte Carlo

It is well know that one uses the Black 76 model to price commodity derivatives. I would however like to perform a Monte Carlo simulation that ties back to this number. How would one go about this ...
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References on Pricing commodity forwards

Any good reference on pricing simple forward contracts with source code? Thanks
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3answers
342 views

Is forward price trendless under the real-world measure?

I recently went through some commodities forward curve modeling documentations, where a diffusion model for the forward price $F(t,T)$ was modeled as a driftless diffusion process (as a function of t ...
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Simulating Asset Prices by Independently Simulating Supply and Demand

If I have an asset, whose supply is generally mean-reverting and whose demand is generally cyclical, could I somehow simulate / project the supply and demand levels across multiple discrete time ...
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1answer
197 views

How to Pull Dump of Old News Articles

My goal is to run a keyword search for phrases like "soybean acreage" or "corn yields" (keywords limited to ag. commodities), and construct a timeline of which dates articles with these key words are ...
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1answer
78 views

optimize gas storage schedule based on forward prices

I am solving some interviewing questions regarding gas storage optimization. I am given a gas storage facility with volume, rate of injection and withdrawal, as well as a current forward curve of gas ...
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228 views

Finding metal price data from LME

Does anyone know any sites that allows you to download free historical monthly metal (copper and aluminium) price data, the best would be LME data. I need historical spot prices, inventory, ...
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1answer
1k views

Delta of a Commodity Future

Generally the price of a future is $ F(t,T) = S(t)e^{r(T-t)}, $ and it's delta is: $ \frac{\partial F}{\partial S} = e^{r(T-t)}. $ (As opposed to the delta of a forward which is always one.) In ...
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1answer
254 views

QuantLib: Is the StochasticProcess class adapt for a HJM type of modelling?

I would like to use the following model in QuantLib: $\frac{dF(t,T)}{F(t,T)} = \sigma_se^{-\beta(T-t)}dW_{t}^{1} + \sigma_L\left(1-e^{-\beta(T-t)}\right)dW_{t}^{2}$ This is a reformulation of the ...
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2answers
301 views

How to trade a Ratio?

I came across a ratio plotting of Corn And Soybeans contracts, notice it's in a historical low, an intuitive question came to my mind, how should I trade this ratio (or relationship)? It's unlike flat ...
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2answers
176 views

How do you calculate price of non-existant call option on commodity future

I've been stumped on this for awhile now. I'm trying to determine the price of a call option on a commodity futures contract that expires in the future. My issue is that while the future's contracts ...
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2answers
152 views

remove seasonality in future contracts

very new to commodities. I have raw agriculture future data, and I need to remove the seasonality (de-seasonalize) from the data, what is the general approach ? Thanks for the help!
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Why do leveraged and inverse leveraged WTI ETNs have this price relationship?

UWTI: 3x leveraged exposure to WTI DWTI: 3x leveraged inverse exposure to WTI The inverse relationship between these two symbols seems to trend toward the origin on a log-log plot (using log base 2)....